The call by Civitas to enable councils ‘to control the local land market’, giving them the ‘whip hand’ over housebuilding, represents a gross oversimplification or lack of understanding of the housing market and the housebuilding industry.
Builders make money by building and selling homes. The only way to secure a return on investment is to build homes provided there is an implementable permission in place.
Very simple modelling shows that to make a bigger profit from delaying building and waiting for house prices to rise would require house price inflation to far greater than what has ever been experienced in this country.
Firstly, as figures out this week demonstrate clearly, housing output is up significantly again year on year. We have now seen housing supply boosted by 52% over the past three years.
This is a huge increase for any industry, but especially so for an industry with the complexities and external determinants faced by housebuilders.
These numbers are a clear demonstration of the housebuilding industry’s commitment to increasing output in response to the positive policies introduced by successive governments.
Every independent expert or body to have examined this issue has established that housebuilders do not ‘bank’ developable land. Having invested huge capital and resource, to progress a planning permission to the stage where it can actually be built out would make no business sense whatsoever.
As NLP’s report based on real-life experience of 70 housing sites showed last week, taking a planning permission from when an initial outline permission is granted to the ‘implementable’ stage so that it can actually be built takes years - 6.1 years, in fact, for large sites. The report found that average build rates on fully operational large sites exceed 160 homes per year, rising to more than 300 in some instances.
Anti-private development commentators will claim that sites stuck in this mixing bowl are part of a developer’s land bank. In reality, these delays are more frustrating for housebuilders than anyone else as they are preventing work starting on homes.
Government should build on the momentum and focus on developing positive policies so the industry can continue to deliver further increases in housing supply. Onerous policies aimed at addressing inaccurate claims made in vacuous reports would in all likelihood have unintended consequences and reverse the huge progress currently being made.